India concerned over trade hostility by Dhaka but may avoid tit-for-tat

NEW DELHI: India has no intention of getting itself embroiled in a trade war with Bangladesh even though the signalling from Dhaka on trade issues remains far from positive. While Bangladesh has been reported to have blocked yarn imports through land borders from India, Indian government sources maintain that India’s recent withdrawal of the trans-shipment facility extended to Bangladesh in 2020 was meant to ease congestion at Indian ports and airports.

India has ensured that this action does not impact Bangladesh's exports to Nepal and Bhutan transiting through Indian territory.

Amid a series of anti-India statements and also actions by Dhaka that bordered on trade hostilities, PM Narendra Modi had urged Bangladesh Chief Adviser Muhammad Yunus in their recent meeting in Bangkok to avoid rhetoric that could vitiate the atmosphere. The Indian side believes that even before the transshipment facility was blocked, the interim government in Bangladesh had taken steps that threatened to disrupt trade ties.

The decisions to shut 3 land ports with India and also to block yarn imports were all taken in March. Dhaka’s decision to “tighten vigilance” at the Benapole Customs House in January was also seen as a restrictive move. Bangladesh knitwear manufacturers have already warned the government that the decision to block yarn imports will prove to be suicidal for apparel exporters.

While looking to restrict trade with India, the interim government has also resumed direct trade with Pakistan. Bangladesh agreed in February to purchase 50,000 tonnes of Pakistani rice through the Trading Corporation of Pakistan (TCP).

Amid reports of increasing radicalisation in Bangladesh, the revival of Dhaka’s ties with Pakistan, which India sees as the fountainhead of global terrorism, has been of particular concern to Indian authorities. To start with, Pakistan is reported to be looking for opportunities to boost its exports to Bangladesh. There has been a dramatic renewal of high-level contacts between the 2 countries after decades with Pakistan foreign secretary Amna Baloch set to visit Dhaka on Thursday and foreign minister Ishaq Dar next week.